News Release

Securities regulator alleges fraud against Silvercorp short-seller

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Vancouver – The Executive Director of the British Columbia Securities Commission has issued a notice of hearing alleging that Jon Richard Carnes, a man who ran a hedge fund and operated the “Alfred Little” financial blog, committed fraud.

The notice alleges that beginning in 2010, Carnes began writing negative reports about issuers traded on a North American exchange with business operations in China. Carnes attempted to profit from his negative reports by shorting the issuer’s securities before publishing the negative report, and then covering his short position after the issuer’s share price dropped in response to his negative report.

BCSC staff contends that in about June 2011, Carnes targeted Silvercorp  as the next issuer he would try to profit from by issuing a negative report. Silvercorp is a mining company and reporting issuer with its head office in Vancouver, B.C. It has business operations in China, and its securities trade on the Toronto Stock Exchange and the New York Stock Exchange. On August 15, 2011, Carnes began building a short position in Silvercorp’s shares by purchasing put options that expired on September 17, 2011.

In the notice, staff alleges that Carnes attempted to find a mining expert to support his theory that Silvercorp’s Chinese filings contradicted its North American regulatory filings for the company’s SGX mine, as the Chinese filings had lower production, quality and resource estimates.

When two mining experts failed to support his theory and with his put options about to expire, staff maintains that Carnes wrote a false negative report about Silvercorp and published it anonymously on September 13, 2011 on, a financial blog controlled by Carnes.

Carnes also made numerous false claims about the second mining expert to support his theory, including that the expert had “serious concerns” about the reliability of Silvercorp’s North American filings. In reality, the second mining expert had explained that the differences between the Chinese filings and the North American filings were due to different reporting standards and different legislated cut-off grades.

After Carnes published his report on, Silvercorp’s share price closed down 20% for the day, wiping out over $275 million in shareholder value. Carnes closed his short position in Silvercorp’s shares by the next day, earning a gross profit of almost USD $2.8 million.

During the period in question, Carnes was a resident of Vancouver and ran a hedge fund called EOS Holdings LLC. EOS Holdings was operated through a number of corporations and entities in various jurisdictions and had a staff that reported to Carnes.

The BCSC wishes to thank the U.S. Securities and Exchange Commission for its assistance throughout the investigation.

These allegations have not been proven. Counsel for the Executive Director will apply to set dates for a hearing into the allegations before a panel of commissioners on February 4, 2014 at 9:00am.

You may view the notice of hearing on our website by typing Jon Richard Carnes or 2013 BCSECCOM 559 in the search box. Information regarding disciplinary proceedings can be found in the Enforcement section of the BCSC website.

Please visit the Canadian Securities Administrators’ Disciplined Persons List for information relating to persons disciplined by provincial securities regulators, the Investment Industry Regulatory Organization of Canada (IIROC) and the Mutual Fund Dealers Association (MFDA).

About the British Columbia Securities Commission (

The British Columbia Securities Commission is the independent provincial government agency responsible for regulating capital markets in British Columbia through the administration of the Securities Act. Our mission is to protect and promote the public interest by fostering:

  • A securities market that is fair and warrants public confidence
  • A dynamic and competitive securities industry that provides investment opportunities and access to capital

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Media Contact:
Richard Gilhooley, Media Relations

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